I recently attended consensus event in NYC and my biggest takeaway from the
conference was that Bitcoin is really undervalued and could hit $40,000
by the end of this year
Here's why
There are two reasons for this :
First, the Lightning Network is coming soon, and it will lower transaction costs significantly.
But let me back up and explain the Lightning Network.
It’s a scaling solution that works on top of the bitcoin blockchain…
the same way an app works on top of your smartphone’s operating system.
The Lightning Network will allow some transactions to take place off the bitcoin blockchain.
It’s a great idea because not every $2 transaction needs to be recorded on the blockchain.
That’s just incredibly inefficient.
The Lightning Network will drive transaction costs down to one-millionth of a penny per transaction.
It will be virtually free to make transactions. Merchants will love it.
This is all part of the natural evolution of a technology.
No technology has ever started out super user-friendly.
Right now, people are saying bitcoin is too expensive and inefficient.
Look, people said that about computers back in the 1980s.
I had a computer back in the early ’80s. It had a grand total of 48 kB (kilobytes) of RAM.
And I thought I was on top of the world.
Today, the average computer has 4 GB (gigabytes) of RAM—that’s nearly 100,000 times more.
And computers have become a lot more user-friendly since then.
We have gone from seeing just text and a cursor onscreen to hypertext language
to streaming movies and video games.
None of that was possible on my 48 kB computer.
We’ll see the bitcoin network scale just like we saw computer memory scale.
There’s another new project out there by blockchain development firm RSK.
It’s working on a method to put smart contracts on the bitcoin platform.
A smart contract is a computer program.
You write the terms of the deal into computer code.
And the smart contract automatically executes the agreement when the terms are met.
You don’t need a third party, like a lawyer or agent.
Consulting firm Capgemini estimates that the investment banking, retail banking,
and insurance industries can save a combined $39 billion annually
by using smart contracts for settlement, mortgage loans,
and insurance claims.
By the end of the year, we expect to see 10 million of these smart contracts.
Within the next five years, that number could reach the billions.
To put that into perspective, it took six years for the internet to scale to 10 million websites.
After 20 years, we’ve just reached one billion websites.
So you can see how big this trend will be…
Once RSK rolls out its protocol, developers will be able to create smart contracts
using the bitcoin blockchain.
That’s very exciting.
Bitcoin has one huge advantage over all other cryptocurrencies
when it comes to smart contracts—it’s immutable.
Cybercriminals have never hacked the bitcoin blockchain…
(It would take at least $1.5 billion in equipment and at least nine months of time to even try to hack it.
And that doesn’t even account for the electricity costs, which run in the hundreds of millions of dollars.)
Once you write data onto the bitcoin blockchain, it’s there forever.
It can’t be tampered with.
No other blockchain can say that with the certainty that bitcoin can.
Another word for this tamper-proof feature is “immutability.”
It’s immutability that gives bitcoin its value. With the emergence of cheap, fast transactions
(via the Lightning Network) and smart contracts (via RSK), the stage is set for bitcoin to experience
a surge of app development similar to what we saw with Ethereum last year.
We’re going to see an explosion of app development take place on the bitcoin blockchain.
And that new usage will push up the price of bitcoin.
People are going to call me crazy… But I think bitcoin hits $40,000 this year.
